**Remember, nothing on this page is legal advice to you.It is general information and may not apply to your circumstances. It also may not be up-to-date. Use it to learn the issues involved, not to make important decisions.**
Shop Marketing Cautions
There is a wealth of information on various means of marketing internet shops. Many are quite good on potential effectiveness. They often fail, however, to keep their readers out of hot water. There is a tendency for POD participants to view their activities as just a diversion, a hobby, not a real business. So the need to learn and follow rules for business is often overlooked. The law, however, often takes a different view of things. Many marketing schemes must be approached carefully to stay legal or avoid angry backlash. Getting a letter from a District Attorney or Attorney General demanding proof of compliance with the law can really ruin a good day. So make sure you learn the risks and the rules of you choice of marketing.
Advertising that a portion of sales will go to charity may open a legal can of worms.
Charity marketing is the name used to describe businesses that advertise based on donating to some worthy cause. When you market on the basis of making a donation to charity you bring yourself under the jurisdiction of the Attorney General's Office, or the Department of Justice. Because of the potential for abuse they tend to watch such things. It is their duty to protect consumers and charities from fraud and thus to ensure that promises made are kept. Make sure that you keep accurate records so that you can prove that you have followed through on those promises.
Don't use the name of a particular charity, or allude to it, unless you receive permission. Using a charity name may violate trademark or service mark laws. It is not a legal excuse that it was done for the benefit of the charity. It is entirely understandable that a charity places high value on being clear about their connection to fundraising in their name.
If your primary motivation is not sales generation, but supporting a charity or a cause you believe in, open a shop for the charity.
If you want the greatest benefit for your effort that would be to open an entirely separate account for the charity. Work out an argreement with the charity. They allow you to open a shop in their name. They provide you with their tax ID number. You open and manage the shop. You give their board or secretary or whatever the login information so it is their account. They own the shop, you just manage it. All proceeds are sent directly to them. Doing that kind of set up makes it very easy to satisfy the Attorney General because you never receive the money, and you don't need to keep any accounting.
If you never have control of the assets then it isn't your income. It is simple, clean and very low risk. You can also consult with your tax professional about the deductibility of your services. You may be able to deduct whatever is appropriate according to the the IRS rules for "in kind" donations (which might be nothing, I haven't looked at the rules in about ten years). If you keep the items in your own account then you will be required to pay income tax on all the sales amounts. Your ability to deduct the amounts you give to charity will be restricted by your tax situation and ability to deduct charitable donations.
Encouraging sales by making charitable donations.
If you are hoping to encourage sales by stating that you will give a portion of proceeds to charity, be very careful. If, for example, you advertise a promotion saying that a charity will get 10 cents from each purchase from your shop several states require (among other things) that you submit a contract with the charity, provide a post-promotion accounting to the state, and make certain disclosures to the public. See Contemplating A Charitable Sales Promotion? Think Before You Solicit. In Massachusetts, for example, any person who promotes the sale of any good or
service in conjunction with the name of any charity may be a "commercial co-venturer" and may be required to file a bond.
If you choose to make the promise to donate but accept the income as yours record keeping is critical. Do keep detailed, current and accurate records. Don't "borrow" money that should have been donated with the idea you will make it up later. Failing to keep to the promises made on your web site could get you into deep legal trouble. Don't list a specific charity unless you have written permission from them to use their name. Do make and retain screen shots of whatever charity donation claims you are making and record the posting date(s). Do take into account tax rules since the income will be yours. Depending upon your tax situation you may not be able to deduct all that you will be legally required to donate. And yes, if you advertise a promise to donate you have undertaken a legal, not just a moral obligation to do so.
Contests and Give-Aways
It sounds like such a simple idea. Offer a chance at a free t-shirt if people will sign up for your newsletter. Nothing illegal about that is there? Well, maybe not, but then again maybe. It depends on a lot of things and you need to know what those things are, especially if you aren't going to keep it very simple. For example, courts can view the time a person spends answering questions and providing information as providing value in exchange for the opportunity to win. And that can convert an easy give away into illegal gambing. So ask visitors just for the information you need to notify a winners of their success. Failure to make it very clear that entry is cost free can also create a risk of legal action.
If your contest or give away is open to the entire world you need to know that the same thing that makes a contest legal for one will make it illegal for another. For example, a "give away" that requires no skill to win may very well be considered illegal gambling in Canda, even if there are no costs to enter. Canadian residents participating in a give away contest may be subject to criminal prosecution. Keep in mind that inviting or allowing a person to participate in illegal activity may subject you to criminal prosecution.
The article Legal aspects of Marketing Promotions is an invaluable resource toward keeping a promotion a benefit to your income, not a risk to it. Also seeIs Your Fundraising Raffle Legal in Your State? and Is Your Giveway Legal? And don't forget to check for rules of other entities you might involve. For example, if you use Facebook "likes" or otherwise use Facebook as a means of contest entry you need to be aware of the Facebook rules.
It should be unnecessary to have this section. A person intending to be honest will probably comply with fair trade practices. A person not intending to be honest probably isn't going to listen anyway. Still it is easy to think one is being "clever" when actually they acting illegally. This article from the Federal Trade Commission on Dot Com Disclosures.